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Commitments and Contingencies
6 Months Ended
Jun. 30, 2015
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

(13) Commitments and Contingencies

Catastrophe and Large Loss Exposure

We have exposure to catastrophic and other large losses caused by natural perils (such as hurricanes, tornados, earthquakes, tsunamis, floods, droughts and hail storms), and man-made events (such as terrorist attacks). The incidence, timing and severity of these losses are unpredictable. We assess our exposures in areas most vulnerable to natural catastrophes and apply procedures to ascertain our probable maximum loss from a single event. We maintain reinsurance protection to reduce our potential losses from a future event. In the first six months of 2015 and 2014, we recognized accident year net catastrophe losses, after reinsurance and reinstatement premium, of $10.5 million and $9.5 million, respectively, related to various small catastrophes.

Litigation

We are a party to lawsuits, arbitrations and other proceedings that arise in the normal course of our business. Many of such lawsuits, arbitrations and other proceedings involve claims under policies that we underwrite as an insurer or reinsurer, the liabilities for which, we believe, have been adequately included in our loss reserves. Also, from time to time, we are a party to lawsuits, arbitrations and other proceedings that relate to disputes with third parties, or that involve alleged errors and omissions on the part of our subsidiaries.

On June 16, 2015, Albert Ari filed a complaint naming HCC, Tokio Marine Holdings, Inc. and TMGC Investment (Delaware) Inc. and each member of our board of directors as defendants (Albert Ari v. Christopher J.B. Williams et. al., No. 15-11159). On June 18, 2015, Susan Paskowitz filed a complaint naming HCC, Tokio Marine Holdings, Inc. and TMGC Investment (Delaware) Inc. and each member of our board of directors as defendants (Susan Paskowitz v. Emmanuel T. Ballases et. al., No. 15-11171). These two complaints are referred to herein as the SH Complaints. The SH Complaints are pending in the Court of Chancery of the State of Delaware. The plaintiffs in the SH Complaints allege, among other things, that our directors breached their fiduciary duty to our shareholders by approving the merger and failing to take steps to maximize HCC’s value. The plaintiffs also allege that Tokio Marine Holdings, Inc. and TMGC Investment (Delaware) Inc. aided and abetted the alleged breaches of fiduciary duties. The SH Complaints seek, among other things, an order enjoining the acquisition, compensatory damages and an award of attorneys’ fees and costs. On July 9, 2015, the SH Complaints were consolidated as In Re HCC Insurance Holdings, Inc. Stockholder Litigation, No. 11159-CB.

On July 15, 2015, Intellectual Ventures I LLC and Intellectual Ventures II LLC (collectively, Intellectual Ventures) served a complaint naming us and certain of our subsidiaries as defendants (Intellectual Ventures I LLC et. al. v. HCC Insurance Holdings, Inc. et. al., No. 15-cv-00660) (IV Complaint). The IV Complaint is pending in the United States District Court for the Eastern District of Texas. Intellectual Ventures alleges that we infringed on certain patents and seeks damages, costs, expenses, and pre-judgment and post-judgment interest for the alleged infringement, in addition to injunctive relief.

Although the ultimate outcome of these matters cannot be determined at this time, based on present information, the availability of insurance coverage and advice received from our outside legal counsel, we believe the resolution of any such matters will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Investments

In 2015, we entered into an agreement to invest up to $150.0 million in a middle market senior loan program. At June 30, 2015, our remaining commitment was $147.0 million.

Indemnifications

In conjunction with the sales of business assets and subsidiaries, we have provided indemnifications to the buyers. Certain indemnifications cover typical representations and warranties related to our responsibilities to perform under the sales contracts. Under other indemnifications, we agree to reimburse the purchasers for taxes or ERISA-related amounts, if any, assessed after the sale date but related to pre-sale activities. We cannot quantify the maximum potential exposure covered by all of our indemnifications because the indemnifications cover a variety of matters, operations and scenarios and some have no time limit. For those with a time limit, the longest indemnification expires in 2025. We accrue a loss when a valid claim is made by a purchaser and we believe we have potential exposure.